Alternative Investment Funds (AIFs)
AIF (Alternative Investment Fund) under the AIFMD Directive of the EU is an onshore Cyprus and European regulated investment fund (Full EU Cross Border Fund), that operates for the sole purpose of collective management of its portfolio by investing in any predefined asset class and/or other liquid/illiquid instruments to the interest of its shareholders.
Registered Alternative Investment Funds (RAIFs)
A RAIF is similar to AIF however; it is registered and regulated under the responsibility of the AIFM hosting it, whereby all operational and marketing efforts are conducted under the liability of the AIFM as a European fully passported Fund Management Structure.
AIFs or RAIFs Characteristics
- AIFs or RAIF follow similar legal and regulatory principles whereby they are both considered a Fund with Its shares redeemed or repurchased directly or indirectly by its assets following an application of its shareholders as defined the Fund’s Prospectus.
- Its capital is increased by the issue of new shares, whereas its capital is decreased by the redemption or the repurchase of the old ones. Hence it adopts the Variable Capital Investment Company statutes.
- The value of its shares is reflected by the net asset value (NAV) of its assets.
- AIF’s are marketable to qualified, professional or institutional investors both internationally and within the EU member States (full pass-porting rights within EU).
Why Cyprus
- Cyprus is one of the most efficient jurisdictions for Funds in Europe in all areas (e.g. administration, auditing, and custody/depository fees)
- Efficient, experienced, responsive, and accessible regulatory authority (CySEC)
- License granted by CySEC is valid to all EEA jurisdictions
- Financial reporting system based on IFRS and compliant with OECD guidelines
Tax Considerations
- Low corporation tax 12.5% (special exemptions apply for shipping companies)
- Notional Interest Deduction on new equity
- Excluded from tax on i) dividends received, ii) profits on the sale of securities, iii) capital gains arising from the sale of property abroad, iv) capital gains from the sale of shares of foreign companies
- No subscription tax on the net assets of the fund
- Common funds and Partnership Funds are tax transparent; Added substance, as it is very difficult to challenge that management and control is not performed in Cyprus
- Taxation of Fund Manager
- Double Tax Treaties Cyprus double tax treaty agreements
- Normal VAT rules apply
- VAT on Management and Administration
- No VAT charged on services in respect of investment management, administration and marketing services supplied in Cyprus or abroad to Funds, which are carrying on business in Cyprus
Licensing Process
- The process has the following main steps:
- The legal vehicle for the fund must be registered with registrar of companies (FCIC, VCIC or LLP).
- All the personnel and/or external associates involved in the fund must be identified and committed through letters of intent
- The prospectus must be prepared
- Preparation and submission to CySEC of application with all necessary supporting documents.
- Approval and commencement of operations
|
AIF-UNP |
AIF-LNP |
RAIF |
||
Management
Type |
Externally
Managed |
Internally
Managed |
Externally
Managed |
Internally
Managed |
Externally
Managed |
Supervising
Authority |
CySEC |
CySEC |
Indirectly supervised and regulated by
CySEC through the Manager |
||
Legal
Forms |
Mutual Fund Fixed or Variable Capital Investment Company Limited Partnership, with or without
legal personality |
Fixed or Variable Capital Investment
Company Limited Partnership, with or without legal personality |
Mutual Fund Fixed or Variable Capital Investment Company Limited Partnership, with or without
legal personality |
||
Physical
Office |
The manager’s offices can be used |
Required |
The manager’s offices can be used |
Required |
Not Required |
Number
of Directors |
Minimum 2 (1 Executive Director) |
Minimum 4 (2 Executive Director) |
Minimum 2 (1 Executive Director) |
Minimum 3 (1 Executive Director) |
Minimum 2 (1 Executive Director) |
Marketing |
Professional and/or Well - Informed Investors Retail Investors |
Professional and/or Well - Informed
Investors |
Professional and/or Well - Informed
Investors |
||
Number
of Investors |
Unlimited |
No more than 50 |
Unlimited |
||
Investment
Restrictions |
Investment Restrictions apply depending
on the investment strategy and type of investors |
No requirements or limitations |
Limited rules may apply |
||
Capital
Requirements |
No initial requirement |
€125,000 initial requirement |
No initial requirement |
€50,000 initial requirement |
No initial requirement |
Assets
Under Management with the first 12 months |
€500,000 |
€250,000 |
€500,000 |
||
Assets
Under Management |
The assets under management should reach the threshold for AIFM registration set in the AIFM law being: • €100 mil with leverage, or • €500 mil without leverage and a lock
up period of 5 years |
The assets under management should reach the threshold for AIFM registration set in the AIFM law being: • €100 mil with leverage, or • €500 mil without leverage and a lock
up period of 5 years |
No limitations |
||
Fund
Manager |
Fund Manager licensed in the EU, MiFID Investment Firm, Cyprus Mini-Manager (to be
enacted), EU Sub-threshold AIFM |
N/A – Internally Managed |
Third country manager, UCIT Manager
licensed in the EU, MiFID Investment Firm, EU
Sub-threshold AIFM, Cyprus Mini-Manager (to be enacted) |
N/A – Internally Managed |
Externally managed by an AIFM
established in Cyprus or within another EU Member State, RAIFs structured as
limited liability partnerships may also be externally managed by managers
other than AIFMs subject to conditions |
Portfolio
Management |
By the manager |
By the AIF board |
By the manager |
By the AIF board |
By the manager |
Depositary |
Mandatory appointment of a local
Depositary if managed by an AIFM Cyprus, EU, or in a third country based if
AIFM is not appointed |
Cyprus, EU or in a third country based. May be waived if one of the following criteria is met: • total assets of the Fund < 5 mil • up to 5 Investors • no more than 10% of total assets are
subject to custody and; investors up to 25 and; minimum investment per
investor is at least equal to EUR 500.000 |
Mandatory appointment of a local
Depositary if managed by an AIFM Cyprus, EU, or in a third country based if
AIFM is not appointed |
||
Unit
transferability |
freely no limitations |
freely as long as the number of
investors do not exceed 50 and the potential transferees are Professional
and/or Well - Informed Investors |
freely as long as the potential
transferees are Professional and/ or Well - Informed Investors |
||
CySEC
Application Fees |
€1,800 plus €400 for each additional
investment compartment |
€1,300 plus €300 for each additional
investment compartment |
€400 plus €100 for each additional
investment compartment |
||
CySEC
Annual Fees |
€1,800 plus €400 for each additional
investment compartment |
€1,300 plus €300 for each additional
investment compartment |
€400 plus €100 for each additional
investment compartment |
We help you with
Supporting your AIF from the start
From the inception of your fund, our team will help you to establish your AIF.
Whatever is your target: Safeguarding of Assets, Return on Investment, Tax Optimisation – the appropriate AIF structure can be prepared to suit your needs.
Relating to these important early stages, our value-added services include:
- Close collaboration with all Fund key players.
- Coordination with lawyers, auditors and other service providers.
- Tailored prospectus and investment procedures to fit your needs
- Participation in reviewing the Fund’s documentation (Prospectus, Articles of Incorporation, etc).
- Guidance on safekeeping requirements for financial and non-financial assets.
- We can further support you in dealing with the regulatory authorities.
Our capabilities cover a wide range of disciplines:
- Fund formation and implementation.
- Regulatory understanding.
- Familiarity with legal structures.
- Specific asset class experience.
- Project management.
- Relationship management.
- Board Representation is possible depending on qualifications and regulatory approval.
- Members of our team may be appointed as the Risk Manager, the Compliance Officer or the Internal Auditor of your investment fund.
Let’s start a conversation about your AIF.
We would be pleased to hear more about your project and help you ensure its success.
FAQ
Members of the Cyprus Investment Funds Association (CIFA). Member of the Cyprus-India Association. Our team are Certified Persons in the Public Register of the Cyprus Securities and Exchange Commission (CySEC) and members of ICPAC